Insurance Giant Life Insurance Corporation of India (LIC) is all set to hit the market with India’s largest ever IPO in history on 4th May 2022.
The government will be diluting a total of 3.5 percent of its stake in LIC by IPO. The price band for the same has been fixed at a price band of Rs 902-949. The total issue is valued at Rs 21,000 crore at the upper price band of 949. The retail investors reservation is 35 percent, LIC employee’s quota reservation is 0.71 percent whereas 10 percent quota reservation is there for LIC policyholders which is first of a kind move in any IPO in India.
Process of details you need to know before investing in an IPO.
What is an IPO?
An IPO is where the eligible unlisted company is offering shares for the first time through public issue of shares.
Are there any limits to how much one can invest in an IPO?
If you are investing in any one of these reserved quotas - policyholders, employees or retail - you can invest maximum of Rs 2 lakh (discount is netted off) i: e 13 lots through your own demat account. (Demat account is a virtual locker for investors where it can hold the securities in virtual form). Since LIC IPO have quota of retail investor, policy holder and employees, if you bid in all the three quotas, you can get an aggregate limit of Rs 6 lakh by investing through all three categories. However, if you are bidding for the shares in the retail category and policyholders’ quotas, you can get an aggregate limit of Rs 4 lakh. The discount offered vary in all category.
What are the discounts offered in LIC IPO for various category?
The discount offered is RS 45 for Retail and Employees Category whereas the discount offered in policyholder Category is RS 60 which is higher than other two categories. If you place the bid at higher end of price band at 949 than retail and employees will get the allotment at 904 and policyholder will get the allotment at 889. The discount offered is somewhere around 5 to 6.5 percent in various category. An investor will get this discount if he applies for maximum 13 lots in each category.
As per SEBI norms the lot size should be in the price range of (10000 – 15000 per lot). In case of LIC IPO an investor can apply for a minimum single lot of 15 shares per lot. Small lot size of less than RS 15000 helps small investors to participate in an IPO by applying for minimum one lot.
Role of SEBI:
To develop Capital Markets for the growth of economy.
To ensure wider participation and small investor awareness to participate in economic growth.
Corporate governance and protect small investors.
Can an investor bid in the non-institutional portion for more number of shares?
Yes, an Investor can bid for more than Rs 2 lakh worth of shares in the non-institutional category quota (NII) but then you will not be able to bid in the retail quota. Further if an investor bid in retail quota than he is not eligible to bid in NII quota. However, if an investor bid in both the category than both his bid will be rejected. There is no discount offered in NII quota. Generally, it is meant for HNI (High Networth Investor) who want to apply more number of shares. In Book Building Process IPO, minimum 15 percent is reserved for NII category. This all is coming out of the Wisdom of the faculties and experts of the NIWS Stock Market Institute In Jaipur
A resident Indian National, Hindu Undivided Family (in the name of Karta or an eligible NRI who have resided in India for more than 182 days. The maximum bid a retail investor can apply is up to Rs 2 lakh i:e maximum of 13 lots at higher end of price band (lot size is in the range of 10000 – 15000 per lot)minus net of retail investors’ discount offered in an IPO.
What are the modes an investor can use to invest in the IPO?
An Investor can bid for an IPO through ASBA facility with the help of a broker wherein the amount of application is blocked in investors own bank account. If an investor receives an allotment than the fund is transferred to company account or if the application is rejected than the funds are released instantly.
Conclusion:
IPO gives a very lucrative opportunity for small investors who want to learn investing in capital markets. Generally, when market conditions are good majority of IPO with a rating of 5 list at an premium on listing date given the fact that IPO gives an opportunity to invest in those companies which were not available for public investment. A company with good growth prospects and fundamentals will give good returns to an investor. However, if you are looking to get your knowledge advanced and want to grab IPO and want to mkae good money in Stock Marekt then you need to join the Stock Market Course In Jaipur
Start with a demonstration class.